As a startup founder, one of the most important decisions you’ll ever make is your choice of a co-founder. Finding the right one is crucial. You’ll work through drudgery together and you’ll move as a singular unit when your startup is having funding or traction problems. Your habits, mindset, and instincts will inevitably clash, especially during difficult times.
Therefore the first thing you must do is to take your potential co-founders through a careful vetting process. Don’t simply take skills, experience, and compatibility at face value. You need to dig deeper and ask tough questions.
The First Question
Before you engage a potential co-founder in a lengthy discussion, make sure you’ve asked this first: Is getting a co-founder really the right move for you? Consider the following pros and cons of having a co-founder:
- Faster scale. Compared to a founding team with two members, solo founders take 3.6 times longer to reach scale, according to the Startup Genome Report. The report defined scale as the stage where the startup gets Series A funding, has massive customer acquisition, and has more established operations in the form of executive hires and the creation of departments. Once at this stage, your startup will have established a solid foundation, since it has already solved basic issues such as product-market fit, product-solution fit, and fundraising. While you shouldn’t rush to scale, the faster your startup achieves it the less time your startup spends in uncertainty.
- Co-founders can bring in complementary skills. Co-founders can also bring in domain expertise you don’t have. A technical founder can bring in a co-founder with marketing or business development experience, and vice versa. The benefits of having complementary experience will play out in many areas of your startup. Balanced teams with technical and business co-founders tend to raise 30% more money and have more user growth than teams that are heavily focused on either business or tech. They are also more likely to scale at an appropriate rate.
- Co-founders can broaden your network. You only get this benefit if you choose a co-founder who doesn’t have many overlapping networks with you. Did they attend a different school? Did they join organizations that you’re not a part of? Are they coming from a field or industry that you have little experience in? If your co-founder can broaden your network, this can help you build relationships with potential partners and investors, give you access to a referral pipeline for top talent, and provide you with support or mentorship.
- Solo-founded startups have longevity. While there are some advantages to having a founding team, research shows that despite founding teams raising more money than solo founders, solo-founded startups tend to last longer and generate more revenue.
- Equity-split issues. Your equity split at the beginning of the startup might end up being unfair down the road. Most founding teams (73-percent) split equity within a month of their founding, and more than half of them don’t have any adjustment plans for when things change, such as when the involvement of a founder changes or when the business model shifts.
- Slower and more complicated decision-making. Decision-making is quicker with one person. A founding team would require consensus and debate, especially if the founders have equal equity. Delay in decision-making can be costly during emergencies. Having many co-founders can also splinter decisions into multiple opinions, leading to additional conflict or decision stalemates.
Once you’re absolutely sure that teaming up with one or more co-founders is the right direction for you, it’s time to meet with potential candidates. In these meetings, you’ll need to discuss not just their level of commitment, but also their approach to decision-making, conflict, and finances.
Criticism and Conflict Resolution
At any given time, you may find yourself in conflict or receive negative feedback — whether from each other, investors, customers, or the press. How would you and your co-founder react and deal with it?
Understand how you’ll both handle negative situations because your compatibility in conflict resolution is critical to your startup’s success. Consider the stats: According to research cited in The Founder’s Dilemmas, 65% of high potential startups fail because of co-founder conflict. Additionally, nearly half of entrepreneurs end up buying out their co-founders, according to research from Fuel Ventures. In 71% of these cases, the buyout happens because of differences in opinion.
You and your co-founders must be able to resolve differences constructively, otherwise the startup will likely end in failure and/or your relationships with co-founders will end up in a buyout.
The following questions can help you gauge your conflict resolution compatibility:
- What non-negotiables should be included in your co-founder operating agreement?
- What concerns do you have regarding the extent and quality of your co-founder’s potential contribution to the startup? Do you think it matches up with their role and equity?
- What traits do you think are essential for your co-founder to have?
- What's the most painful feedback you've ever heard about your work? How did you react internally? How did you respond externally? What were the long term effects of this feedback?
- What are some of the major disagreements you've had with teams you’ve worked with previously? How was each of them resolved?
- Have you ever seen professional disagreements end up badly? How do you think they should have been handled?
As founders, you have to make decisions on the go, whether it’s about high-level strategies such as pivots, or street-level tactics such as which positions to fill for your early hires.
Because your decision-making skills are constantly tested, find out how your potential co-founders make decisions and whether it helps your own decision-making, especially on tough issues without an obvious answer.
First, find each other’s decision-making blind spots and think of ways to manage them. One co-founder might be tech, while the other might be non-technical. How might they approach technical decision-making — such as which platforms to pursue, the ideal release cadence — with these very different perspectives? Alternatively, if one co-founder is in charge of a specific process in the startup (ie. management), how much of a say will the other co-founders have for major decisions in that process?
Here are some additional questions you can discuss with your potential co-founders:
- Why are you creating this startup? The surface-level answers might be about creating impact, building a great product, or making money. You’ll need to dig deeper and ask them why this reason drives them so that you understand their motivations.
- What alternate opportunities are you giving up to join this startup? How do you feel about missing or postponing these opportunities?
- What would make you want to leave the startup? These might include working conditions, financial conditions, life events, or reaching/missing specific goals.
- Who has the final word? How will decision-making ties be broken, especially if the equity split is even among co-founders? What criteria will be used to weigh the opinions of each co-founder?
Professional Anxieties and Stress
Tech founders and employees typically have a fear of failure or impostor's syndrome. Most founders also have self-reported mental health concerns. These can get in the way of one's health, confidence, and relationships, affecting the startup’s day-to-day progress as well as big-picture decisions.
To ensure that the founding team and early-stage employees are able to manage their professional anxieties, discuss the following:
- How do you deal with stress and anxiety?
- How do you plan to deal with the challenges of running a startup?
- Did you have any overwhelming internal challenges or anxieties about a professional/business project? What were they? How did you manage them?
- How will you factor in well-being into your culture? (Ex. flexible work, remote work, wellbeing programs.)
- Do all the founders have enough support to deal with challenges within and outside the company? What would having enough support look like?
Attitudes About Money
Every member of the founding team will bring in different perspectives and behaviors about money— whether they realize it or not. These attitudes about money can become an issue when it comes to equity distributions, compensation, and how you'll make financial decisions in the startup. Financial discussions are often the most challenging discussions to have. This is especially true because a startup’s finances are dynamic, not static. The things that hold true during the startup’s first six months might not be the same in the next six.
Your first financial discussion with your co-founder will likely be about equity split. What equity split is fair to the founders? Is this split right for the company? For example, an even split may seem “fair” on the surface but will lead to decision impasses. Also, a year from now an even split might not reflect the actual cash and non-cash commitments of each member.
Here are some additional financial questions you should discuss with your co-founders:
- What are the positive and negative consequences for your chosen equity split? How will these consequences change during major changes, such as a shift in the business model or life changes for the founders?
- Should there be a vesting schedule? What should it be?
- What are your recommended vesting acceleration trigger events?
- How will you decide which investor offers to accept? What financial and non-financial criteria will you prioritize?
- Let’s say you’re about to hire your first employees. How much stock should you give them?
- Which parts of the business should you never cut corners on?
Need for Independence
Co-founders also need independence from each other. This makes the relationship stronger and brings in a diversity of ideas and experiences into the founding team.
Find out how much independence each co-founder needs. This could be as simple as day-to-day independence (being left alone when "in the zone" at work) or a broader independent role in the company (a specific area or department where only they have the final say.) Here are some other discussions to consider:
- When pitching to investors or large-scale clients, what individual strengths and contributions do you emphasize for each founder? What individual stories do you tell about how and why you joined the startup?
- Can co-founders take on side projects that are unrelated to the company but still fall under tech? What would the limitations be?
- What do you think a typical workday together should look like?
Have the Difficult Discussions Now
If the above questions seem like a lot of work or are making you uncomfortable, it’s best to put it into perspective. Imagine how much more overwhelmed and uncomfortable you’ll feel six months or a year down the road with the wrong co-founder. By tackling the tough questions with your co-founder now, you’ll both enter the business relationship with open eyes and realistic expectations.
But if you go through these discussions with several candidates and you still can’t find the right fit, you don’t need to force it. You can always go solo.